01/21/2016

Appcelerator Runs out of Gas

Earlier this week, Axway, a global provider of enterprise engagement software that enables application programming interface (API) management, identity management, mobile app development and analytics announced that it had acquired Appcelerator, a privately held cross-platform mobile development platform vendor. Appcelerator’s flagship, Titanium, utilizes an OS abstraction layer approach to convert HTML, JavaScript, and CSS into native iOS, Android, and Microsoft Windows applications. The company also productized an mBaaS solution (Arrow) to help developers simplify the process of assembling APIs, models, and connectors to access unstructured corporate data.

While Appcelerator was successful in growing a large developer community by building a powerful suite of tools for cross-platform development, the company was struggling to achieve profitability and was forced to lay off 30% of its employees this past March. Like others who were early in entering the mobile development platform space (e.g., Antenna Software and Verivo Software), Appcelerator failed to gain the traction required to remain as an independent private firm. While the company raised a significant amount of capital (nine funding rounds for a total of $87.9M), Appcelerator was unable to grow its revenues past $10M, and was unable to gain significant traction with large enterprise customers (a challenge for most young startups).

A Fragmented Market

The mobile development platform and tools space is one of the most active in the ecosystem of mobile-first vendors. Whether native, hybrid, or HTML5 web applications, the number of mobile design and development tools available to developers continues to grow (VDC counted 25+ vendors with less than $10M in annual revenues when we assessed the market in Q4 2015). Market leaders such as IBM, Salesforce, and Kony have cemented their position in the market by focusing on the depth and breadth of their solution range. For example, each of these vendors has been actively engaged in refining their development tooling, expanding their backend data access capabilities, and simplifying their ability to integrate with multiple data sources and third-party systems. Other market share leaders such as OutSystems, SAP, and Microsoft are focused on building more tightly integrated, cleaner, less complicated, and more user-friendly development platforms. Other vendors are focused on modernizing legacy applications and speed—these vendors can reduce the pain associated with manually modernizing code, resulting in more reliable, cost-effective, and feature-rich mobile apps.

While Appcelerator's immediate revenue contribution will be minimal, we doubt that Axway paid a large multiple for Appcelerator, based on its flat growth and inability to grow its enterprise customer roster. However, the acquisition makes sense, as Appcelerator's platform is synergistic with Axway's focus on API management, identity management, and cloud integration. Additionally, Axway's parent company (IT services giant Sopra Steria Group) will likely become a viable channel for Axway to promote Appcelerator's platform going forward.